The Three Questions That Decide Everything
European VAT feels impenetrable because sellers try to learn it as a body of rules. It becomes manageable if you treat it as three questions asked in order, because the answers determine almost everything else.
- Where is your business established? An EU-established company, a UK company and a company established outside both are treated very differently, particularly on thresholds. Non-established businesses usually get no threshold at all.
- Where is the stock at the moment of sale? Goods already inside the UK, goods already inside the EU, and goods being imported at the point of sale sit under different regimes. This is the question that determines registration obligations.
- Who is the customer? Consumers and VAT-registered businesses are handled differently, and since most Amazon sales are B2C, that is the default assumption throughout this guide.
Everything below is an elaboration of those three. When a VAT question feels impossible, it is normally because one of the three has not been pinned down.
Figures in this guide reflect the framework as it has operated since the 2021 reforms, and specific thresholds do change. Use these numbers to understand the structure, then confirm the current values with an accountant who handles cross-border ecommerce before you file anything.
Where Your Stock Sits
If you remember one principle, make it this one. Storing goods in a country generally creates a VAT registration obligation in that country. Not selling to it. Storing in it.
This is why FBA changes the calculation so sharply. Selling to a German customer from a warehouse in Poland is a cross-border sale that can be reported through a single EU return. Storing units in a German fulfilment centre is a local taxable presence, and Germany expects a German registration. The customer is identical in both cases. The tax treatment is not.
It follows that enabling any programme which redistributes your inventory across borders is a tax decision as much as a logistics one. Pan-EU FBA reduces fulfilment fees and shortens delivery times by placing stock close to demand, and it does that by moving your goods into multiple countries, each of which then wants a registration. Sellers who switch it on for the fee saving, without registering, can build up liabilities in several jurisdictions at once, and those liabilities are usually discovered later with interest and penalties attached.
The programmes that keep stock in one country, sometimes called the European Fulfilment Network or similar consolidated arrangements, avoid this by fulfilling cross-border from a single location. They cost more per unit and they keep your registration footprint small. For sellers testing a new market, that trade is often correct. Once volume justifies it, register properly and take the fulfilment savings. If you are weighing up which markets to open first, our marketplace guides set out the commercial picture country by country.
The UK Since 2021
The UK left the EU VAT system at the start of 2021 and now runs its own regime, which broadly works as follows.
For UK-established businesses there is a registration threshold based on taxable turnover, which has stood at 90,000 pounds. Below it registration is voluntary, and plenty of sellers register early anyway so they can reclaim input VAT on stock and on Amazon fees.
For businesses established outside the UK, there is no threshold. If you are selling goods that are already in the UK to UK customers, the obligation effectively starts immediately. Sellers frequently assume the 90,000 pound figure applies to them, send stock to a UK fulfilment centre, and trade for a year before discovering it never did.
Imports are split at 135 pounds. For consignments at or below that value sold to UK consumers through a marketplace, Amazon accounts for the VAT rather than it being collected at the border. Above 135 pounds, import VAT and any duty apply at importation in the normal way, which means somebody has to be the importer of record and somebody has to pay it.
You will also need a GB EORI number to import goods into the UK at all. It is a straightforward application, it is free, and not having one is a common reason for a first shipment to sit at the border while a freight agent waits for paperwork.
The EU, OSS and the 10,000 Euro Threshold
The July 2021 reforms replaced the old system of separate distance selling thresholds for each country with something simpler for cross-border sales.
For businesses established in the EU, there is now a single EU-wide threshold of 10,000 euros covering cross-border B2C sales of goods and certain services. Below it, you can continue charging your home country's VAT rate. Above it, you charge the rate of the customer's country, and the One Stop Shop scheme lets you report all of those sales through a single quarterly return filed in your own member state rather than registering in each destination.
That is a genuine simplification, and it is where the confusion starts, because OSS is often described as a single EU VAT registration. It is not. It is a single reporting mechanism for cross-border sales. It does nothing about stock.
So the correct model for an EU seller using Pan-EU FBA is both things at once. Local VAT registrations in every country where inventory is stored, because storage creates a local obligation. Plus OSS to report cross-border sales made from those locations to customers elsewhere in the EU. Sellers who set up OSS and consider the matter closed are the ones who receive assessments from tax authorities in countries they have never visited.
Businesses established outside the EU do not get the 10,000 euro threshold. It applies to EU-established sellers only.
IOSS and the 150 Euro Consignment Rule
The Import One Stop Shop covers goods imported into the EU in consignments valued at 150 euros or less. It exists because the old low value consignment relief was abolished, meaning VAT is now due on imported goods of any value, and collecting small amounts at the border is slow and unpleasant for everyone.
With IOSS, you charge the destination country's VAT at the point of sale, the parcel clears customs without VAT being collected at the border, and you report everything through one monthly return. The customer pays a clear price at checkout and receives the goods without a courier demanding a handling fee on the doorstep, which is worth real money in avoided refusals and complaints.
Without IOSS, VAT is collected at import, usually by the carrier, who adds a clearance charge and then asks the customer for payment before delivering. A meaningful share of those parcels get refused, and the ones that arrive produce unhappy buyers who did not expect an extra bill.
Two practical points. Non-EU businesses typically need an EU-established intermediary to register for IOSS, which is a paid service. And the 150 euro limit applies per consignment, not per item, so bundling several products into one parcel can tip a shipment over the line and out of the scheme.
IOSS is only relevant if you are fulfilling into the EU from outside it. If your goods are already sitting in an EU fulfilment centre when the order is placed, this is not an import, and IOSS does not apply.
Where Amazon Collects VAT For You
Marketplace deemed supplier rules shift the VAT collection obligation onto Amazon in defined situations, which is helpful and frequently misread as a general exemption.
Amazon generally accounts for the VAT where goods are imported in consignments within the relevant low value threshold and sold to consumers through the marketplace, and where goods already located in the UK or EU are sold by a seller who is not established there. In those cases Amazon calculates, collects and remits the VAT, and you see the effect in your settlement reports rather than collecting it yourself.
What this does not do is remove your registration obligations. If you store goods in Germany, Germany still expects a German VAT registration and returns, even where Amazon is accounting for the VAT on the sales themselves. The registration exists because of the stock, and it is also how you reclaim import VAT and local input VAT. Sellers who see Amazon collecting and conclude they have nothing to file are usually wrong.
One adjacent point worth knowing is the treatment of Amazon's own fees. Where you provide a valid VAT number for the relevant jurisdiction, Amazon's selling fees are typically invoiced without VAT under the reverse charge, and you account for it in your own return. Where you do not, VAT is charged on the fees, and for a seller who could have reclaimed it, that is a pure and permanent leak. It is one of the quieter arguments for registering promptly rather than waiting.
The Expensive Mistakes
These recur often enough to be worth naming individually.
- Enabling Pan-EU before registering. The fee saving is immediate and visible, the tax consequence is delayed and invisible, so the decision feels free at the time. Register first, then enable.
- Assuming a threshold that does not apply to you. Non-established businesses generally get no threshold in the UK and no 10,000 euro allowance in the EU. This catches sellers based outside Europe almost universally.
- Letting someone else be the importer of record. If a freight forwarder or supplier imports goods under their own details, you may be unable to reclaim the import VAT, because the right to reclaim belongs to the importer. This can quietly cost thousands on a single container.
- Treating OSS as a substitute for local registration. Covered above, and worth repeating because it is the most expensive one.
- Not supplying a VAT number to Amazon once registered. Fees then carry VAT that you could otherwise have handled by reverse charge.
- Ignoring deregistration when you stop. Closing a market without deregistering leaves filing obligations running, and nil returns that nobody submits become penalties.
None of this is a reason to avoid European marketplaces. The EU and UK together are a very large opportunity and the compliance burden, once set up, is mostly a recurring administrative cost rather than an ongoing decision. The sellers who struggle are not the ones who found the rules difficult. They are the ones who expanded first and looked at the rules afterwards, usually because a fulfilment programme promised a fee saving that turned out to carry a tax consequence nobody had priced.
Get advice that is specific to where your business is established, where you intend to hold stock, and which countries you actually plan to sell into. That conversation is inexpensive compared with a back-dated assessment in a country you did not realise you had registered obligations in.
Frequently Asked Questions
No, and this is the most costly misunderstanding in EU ecommerce. OSS lets you report cross-border B2C sales through a single return, but it does not cover holding stock. The moment your inventory is physically stored in a country, that country generally requires a local VAT registration regardless of OSS.
If your business is established outside the UK and you sell to UK customers, there is no registration threshold, so the obligation usually starts with the first sale. UK-established businesses have a registration threshold, which has stood at 90,000 pounds of taxable turnover, though you can register voluntarily below it.
IOSS is the Import One Stop Shop, a scheme for goods imported into the EU in consignments valued at 150 euros or less. It lets you charge destination VAT at checkout and report it through one monthly return instead of VAT being collected at the border. If you fulfil to EU customers from outside the EU, it usually speeds up delivery and improves the buyer experience.
Broadly yes. Pan-EU FBA works by distributing your stock across fulfilment centres in several countries, and storing goods in a country creates a local VAT registration obligation there. Sellers who enable Pan-EU without registering first frequently accumulate back-dated liabilities in multiple jurisdictions.
In specific situations, yes. Under marketplace deemed supplier rules Amazon accounts for the VAT on imported consignments up to the relevant threshold, and on sales of goods already in the UK or EU where the seller is not established there. It does not remove your own registration obligations where you hold stock.
